Growth and expansion to new markets will continue to make a positive impact on the economy, creating jobs and new business.
Despite these efforts, the ecosystem remains in its nascent stage. The 2022 Startup Genome report estimated that the Palestinian innovation ecosystem is valued at around only US$66 million, with fewer than 300 tech startups.
* The political situation remains the key contributor to the bleak outlook against success for entrepreneurs. As the Palestinian economy overall continues to suffer the long-lasting effects of prolonged occupation, so does the entrepreneurship ecosystem. Impediments include limitations on educational opportunities, limitations from restrictions of movement, limited market access and trade, and a lack of early-stage financing. Private investment falls at 15 percent of the GDP – well below that of most middle-income economies. The restrictions of movement on the trade of goods imposed by the Israeli occupation have encouraged the entrepreneurial ecosystem to focus on high-value service activities, specifically in the technology sector.
IPSD has identified some of the major gaps and binding constraints that affect the entrepreneurship ecosystem of the digital economy in terms of human capital, finance, product markets, enabling policies, institutional support, and connectivity. The IPSD addresses some of the identified gaps by offering programs that contribute to support at the firm level in the form of technical assistance and grants that aim to improve the likelihood of success. It focuses on creating linkages to regional markets and supports the development of a dynamic startup finance ecosystem by cultivating business angel investors and providing early-stage catalytic grant funding to stimulate private investments, operating through the Ignite program and the Co-Investment program.
Palestine is on the Rise and there is great potential for regional growth and expansion.
Over the past few years, IPSD directly supported 145 unique tech/tech-enabled startups and innovative SMEs with various grant mechanisms that improved their chances of remaining in the market and supported further success in new markets. IPSD has provided co-investment and pre-investment grants to increase startups’ runways and secure investments. It has made available emergency response grants for businesses affected by the COVID-19 pandemic and offered a Gaza recovery grant to keep businesses open and able to weather the storm of the consequent external financial constraints. The direct support of firms through these grants has already yielded some important results for entrepreneurs’ growth and expansion. So far, over 30 beneficiary firms have entered 21 markets, including Saudi Arabia (KSA), the United Arab Emirates (UAE), and Kuwait, contributing to over US$9 million in closed deals. Beneficiary entrepreneurs have also reported raising over US$11 million in private investments with IPSD support, with US$5.5 million in private capital raised as part of the co-investment grants program alone.
The Palestinian ecosystem is small in comparison to other ecosystems in the region, but the potential is large. Many successful Palestinians thrive in international markets, and we want to ensure that the talent coming out of Palestine is supported throughout this journey.
As the region has seen a growth in entrepreneurial activity in recent years, Palestinian startups are eyeing the MENA and exploring how they can penetrate these markets. As the domestic market is small in population and fragmented, entrepreneurs are looking outward and penetrating new regional as well as international markets.
IPSD at the MENA ICT Forum: IPSD supported 17 Palestinian companies and startups to exhibit at the MENA ICT Forum, November 16–17, 2022.
The local market is great for validating a product/platform, but in order to truly scale, startups are looking at the region for users, customer base, and new investors. A recent assessment conducted by IPSD has identified that entrepreneurs are most interested in reaching the KSA, UAE, Europe, and North America, however their impediments to access or scale were caused by a general lack of access to finance, external market business enablers and networks, and strategic global partnerships and talent acquisition. Additional challenges include how to establish a product-market-fit, ways to understand customer acquisition and retention, pricing, and so on. Many believe that growth and expansion outside of Palestine will cause a brain drain of talented founders, developers, and technology experts as well as the loss of jobs and identity. However, IPSD has found that supporting entrepreneurs with market linkage activities has created local jobs, improved investor relations, and contributed positively to the economy.
As Palestinian entrepreneurs scale up regionally and internationally, they continue to scale up their staff locally by hiring additional staff to meet the increasing demand, including back-end and front-end developers to work on products that are fit for their new markets.
IPSD in GITEX: A glimpse of IPSD participation at GITEX – North Star. IPSD sponsored 12 startups, representing Palestine, in the world’s largest global startup event. October 10–12, 2022.
When Palestinian entrepreneurs succeed in a new market, they ultimately raise awareness that Palestinians are capable of contributing to high-growth areas in educational technology, healthtech, logistics, artificial intelligence, the IoT, and smart cities development. The entrepreneurs who ultimately need to spend time in their new markets create an informal network that comes together to support other entrepreneurs in registering their companies abroad, finding talent in those markets, and, most importantly, making connections with potential investors. Although Palestine has yet to see a startup make a major exit, their successes should not be downplayed, as recently seen by UserPilot, a software-as-a-service (SaaS) company that delivers in-app experiences, which raised US$4.6 million in seed funding from an international institutional investor.